Barclays has launched the Shiller Barclays CAPE Single Stock Index Family, a new addition to the series of equity sector indices designed jointly by Professor Robert Shiller and Barclays.
Shiller (pictured) and Barclays began their collaboration in 2010, and in 2012 launched the Shiller Barclays CAPE Sector Index Family.
These indices use the Cyclically Adjusted Price Earnings ratio (CAPE), developed by Shiller and John Campbell in the 1980s, to identify long-term undervalued sectors in the US, Europe and Asia. The indices have been well-received by investors, with significant investment in products tracking them.
The new index range also uses the CAPE ratio to determine valuation, but rather than sectors applies this to single stocks of established companies across various regions.
The new indices aim to provide an alternative to market capitalisation weighted indices with a unique value bias based on the CAPE Ratio and momentum. They will initially offer exposure to the US and Eurozone regions with Japan and Asia ex-Japan to follow. In addition to the long-only single stock indices, there will be market-hedged Index versions, which hold a long position in the Shiller Barclays CAPE US Single Stock Index and a beta-adjusted short position in the relevant benchmark index, aiming to provide a ‘market neutral value’ investment. This responds to investor interest in accessing the equity value risk premia.
“We seek to invest in seasoned companies – Old Standbys – that also show good value by the CAPE ratio. This is a new and different approach to value investing that is designed to try to come closer to its original motivation: find stocks that are well established and relatively forgotten, with a long history of earnings but underpriced in the market,” says Shiller.
“Barclays is delighted to continue our long standing collaboration with renowned author and Yale economist Robert Shiller, producing indices which draw on some of his well-known investing concepts. This launch highlights Barclays’ commitment to bringing clients a full array of investable indices based on academic research,” says Ben Redmond, director in EFS Solutions.
“The Shiller Barclays CAPE Single Stock Index Family will offer investors a new way to gain exposure to underpriced stocks. Knowledge of the equity value premia has existed since the 1930s, and we believe this innovative take on it will allow investors a new way to access attractively priced shares,” says David Haefliger, EFS Solutions.
